Magazine article CMA - the Management Accounting Magazine

Redesigning the Organization and Making It Work

Magazine article CMA - the Management Accounting Magazine

Redesigning the Organization and Making It Work

Article excerpt

Here's why most organizational fixes don't work, and some advice on what is required to ensure they do.

Over the years, a number of promising "must-have" organizational solutions and new practices have failed to deliver on their potential. Now, it is beginning to look like re-engineering "didn't work." And, most likely, "teams" won't work either. What does it take to make organizational changes "work" - to get and maintain the desired organizational performance? The short answer, based on our research and experience, is: "It's a system, stupid!"

Here is a discussion of two "system views" on the matter.

View one: the three levels of performance

Nineteenth-century environmentalist John Muir found that each component of the ecosystem is in some way connected to all other components. Similarly, we have found that everything in an organization's internal and external "ecosystem" (customers, products and services, reward systems, technology, organization structure, and so on) is connected. To improve organization and individual performance, we need to understand these connections. We have summarized these connections in what we call the three levels of performance, in Figure one.

The basic premise is that every organization is an adaptive system - the super-system. We call the environment in which any organization exists (its customers and markets, competitors, suppliers, and the general environment of government, culture, and economy) the organization's super-system. Every organization must adapt to changes in its super-system, or it will perish.

1. The organization level - This level emphasizes the organization's relationship with its market and the basic "skeleton" of the major functions that comprise the organization. Variables at this level that affect performance include strategies that are responsive to the reality of the super-system, organization-wide goals and measures, organization structure, and the deployment of resources.

2. The process level - The next set of critical variables affecting an organization's performance is at what we call the process level. If we were to put the "body" of our organization under a special x-ray, we would see both the skeleton of level 1 and the musculature of the cross-functional processes that make up level 2. When we look beyond the functional boundaries that make up the organization chart, we can see the work flow - how the work gets done. We contend that organizations produce their outputs through myriad cross-functional work processes, such as the new-product design process, the merchandising process, the production process, the sales process, the distribution process, and the billing process (to name a very few).

An organization is only as good as its processes. To manage the performance variables at the Process Level, one must ensure that processes are installed to meet customer needs; that those processes work effectively and efficiently; and that the process goals and measures are driven by the customer's and the organization's requirements.

3. The job/performer level - Organization outputs are produced through processes. Processes, in turn, are performed and managed by individuals doing various jobs. If we increase the power of our x-ray, we can see this third level of performance, which represents the cells of the body. The performance variables at this level include job responsibilities and standards, job design, feedback, rewards, and training.

Now we have an organization x-ray that depicts the three critical interdependent levels of performance. The overall performance of an organization (how well it meets the expectations of its customers) is the result of all three of these levels, and the performance variables therein, being aligned. To make changes at the job level that are inconsistent with the direction of the process and organization levels is pure folly. It will make no difference in the organization's performance in the final analysis, and it will confuse and demoralize both employees and managers. …

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